Africa's leading mini-grid initiative reports key findings

Since 2014, Microsoft co-founder Paul G. Allen’s Vulcan Impact Investing team, in partnership with steama.co, a remote monitoring company, has owned and managed 10 solar powered mini-grids that provide clean electricity to rural Kenyans. With nearly two years of operation completed, Vulcan shared its insights in a white paper in its quest to de-risk the sector as well as inspire and inform other investors, operators and partners.

One of the 10 mini-grids developed in Kenya by Vulcan Impact Investing and steama.co

The paper, Powering Productivity, investigates various factors that can make or break the value of a mini-grid including recruiting the appropriate customer base, generating revenue, balancing supply and demand and creating social impact. A significant data gap exists on how to successfully cultivate a paying consumer base in rural African markets. Open data is a hallmark of Paul Allen’s Vulcan Inc. and this white paper, the first in a series, is aimed at growing the mini-grid development opportunity and better serving unconnected communities.

Customers who use mini-grids have shifted almost entirely away from fossil fuels. Prior to the installation of the mini-grids, 86% of customers used unsafe and unhealthy kerosene, disposable batteries or diesel generators to meet their energy needs. Post-installation, only 4% of customers are still using any of these fossil fuels

Customers tend to overestimate how much electricity they plan to use. This makes continuous customer engagement and education a necessity, because surprises undermine customer trust.

Cultural factors can significantly affect profitability, so when conducting site surveys for potential minigrid locations, understanding local culture and politics is key

Text messaging activity can be a good proxy for digital literacy; customers who are proficient with their phones will likely consume more power. One-time payments by phone can be as low as $0.10 with some customers buying electricity as often as five times per day

Businesses in higher-traffic areas are the most profitable customers. A minority of customers, mostly businesses, consume the majority of electricity; the top 10 percent of customers generate 5x the Average Revenue Per User (ARPU) and 40 percent of total revenue

Most customers consume <250 watt-hours/day, yet remain important as a hedge against the loss of higher use customers

Electricity usage fluctuates widely by month and season: use is highest in December and lowest in February